Survey: Pension Funds Still Hungry For Hedge Funds

Nov 25 2014 | 12:47pm ET

CalPERS aside, pension funds have a strong appetite for hedge funds, according to new research from State Street.

Pension Funds DIY: A Hands-On Future for Asset Owners is the result of a survey of 134 senior pension fund executives conducted by the Economist Intelligence Unit in August 2014.

Respondents from 15 countries participated, the majority from the U.S., UK, Australia and Canada. Of the total, 52% were from public sector pension funds, 31% from private sector funds and 16% from superannuation funds. Most respondents (62%) came from organizations that oversee both defined benefit and defined contribution funds.

Despite the high-profile decision of the California Public Employees' Retirement System to dumpt its hedge fund investments, the survey found 25% of pension funds intend to invest in hedge funds for the first time while 29% plan to increase their allocations to hedge funds.

According to State Street, 53% of pension funds plan to make greater use of low-cost investment strategies. “Many are adopting a 'barbell strategy,' to blend the cost  efficiencies of passive strategies with higher-growth/higher-risk asset classes such as alternatives.”

The real story in terms of pensions and alternative assets, however, is private equity—60% of respondents plan to up their allocations to this asset class. A full 54% of pension funds plans to invest more in direct loans, 46% in real estate and 39% in infrastructure.

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